These investor behaviors can permanently damage their startups.
entrepreneurs rely on investors for funding, supportĀ and guidance. Naturally, this type of business relationship can bring out the best or the worst in different types of investors. Startup communities around the world depend on trusted, altruistic investors who are well-aligned with their founders — here are a few investor profiles you donāt want to be and a few you want to avoid if youāre an entrepreneur.
1. Monsieur pay-to-pitch
All too often, weāve encountered angel investors who actually charge entrepreneurs to pitch them. And without enough angel investors to accommodate new startup communities, itās no shock that they get away with this. Donāt be this person, and donāt work with this person.
2. The puppeteer
The puppeteer, simply put, just wants to be a founder — so they tend to get overly involved with your startup concept and team. If youāre an investor who fits this profile, take a step back and consider what you really want. If youāre an entrepreneur, donāt be fooled by the over-eager support; while sometimes helpful, itās often a detriment for a startup team.
3. The coffee curmudgeon
A classic profile in many industries: the contact that only wants to get coffee. Have a serious business question for them? Need to get a final āyesā for an investing opportunity? Crickets. But just setting up a quick coffee? Theyāll be there every time.
4. The terms extractor
More simply put, this person is driven by greed. Theyāre likely to hang on to every term in the term sheet and make ridiculous requests that slow the fundraising process to a crawl. In short, each term is catered to their needs rather than finding common ground for the entrepreneur as well.
5. The loan shark
The loan shark is also driven by greed but is also pretty risk averse. Loan shark behavior manifests itself in many ways, but a common tactic is requesting the entrepreneur to personally guarantee the round or put up collateral to securitize their seed investment (in order to āreduce the investor’s riskā).
Avoiding these toxic investor profiles is easy, as long as you commit to self-awareness. Learn about your strengths and areas for growth so that you can be a strong resource for others in your investing career. Doing so will only help you to build positive relationships along the way that will set you up for personal investing success.
Our team recommends, in the least, taking a minute to understand your āstarting pointā — the investor persona that most matches your strengths andĀ circumstances.
Our team recommends, in the least, taking a minute to understand your āstarting pointā — the investor persona that most matches your strengths and circumstances — today. Take our investor persona quiz here to get started.
Article by: Mack Kolarich
www.entrepreneur.com